Health Care Reform Implementation Update - January 31, 2014

This week the Congressional Budget Office (CBO) provided new scores for the three sustainable growth rate (SGR) repeal proposals from the Senate Finance, House Ways and Means, and Energy and Commerce Committees; a list of potential offsets for SGR legislation circulated Washington; the president discussed the already positive developments from the Affordable Care Act (ACA) in his State of the Union address; Utah announced its intention to expand Medicaid under the ACA tipping the balance of Medicaid-expansion and non-expansion states to more than half expanding, and 20-term congressman and long-time advocate of a health care reform Henry Waxman, announced his retirement. Additionally senator and doctor, Tom Coburn, who has spent 15 years in Congress, will retire at the end of this year.


On January 24, the Congressional Budget Office (CBO) said that the House Ways and Means SGR repeal bill would cost $121 billion over 10 years. Additionally, CBO reduced its estimate for the House Energy and Commerce SGR bill from $175 billion down to $146 billion. Then on January 25, the CBO announced the score of the Senate Finance Committee’s SGR repeal bill of $150.4 over 10 years. The higher-cost Senate Finance proposal includes close to $40 billion in Medicare extenders not included in the other two proposals.

A list of possible offsets for SGR formula repeal is being circulated around Washington. The list is extensive and is derived from policies developed by the Obama administration, the Congressional Budget Office and the Bipartisan Policy Center. All listed potential offset policies are merely options, not cuts or policy changes that will necessarily occur. Cozen O’Connor Public Strategies is happy to provide this list upon request.

On January 28, the House Ways and Means Committee held a hearing on the law’s employer mandate and its definition of a “full-time” worker. The ACA counts employees who work 30 hours a week to be full-time employees, and thus part of the group to whom employers must provide health insurance. At the hearing, retail, restaurant and other business groups argued that the ACA’s definition of full-time work is going to cause businesses to cut employee hours to avoid having to offer them health insurance. Ways and Means Ranking Member Rep. Sandy Levin (D-Mich.) argued in the hearing, “Why wouldn’t you want to cover them? Why wouldn’t you want to cover these people?” Republicans argued that the requirement will simply force employers to alter hours and employment opportunities.

The House Oversight and Government Reform Committee held a hearing titled “A Roadmap for Hackers? Documents Detailing Security Vulnerabilities,” in which the committee continued to examine the security concerns presented by the ACA.

On January 27, senior SensOrrin Hatch (R-Utah), Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) released a legislative outline for a replacement plan to the ACA. The plan envisions issuing tax credits to those not working at a large company, allowing states to set up high-risk pools and significantly reshaping our Medicaid program. The plan would be paid for by capping the tax exclusion for employee health plans. It still needs legislative language and an official cost estimate, but it is unlikely to move through the Democrat-controlled Senate.

On January 28, the House voted 227-188 to pass the No Taxpayer Funding of Abortion Act, which would ban federal subsidies from going toward insurance plans that cover abortion and making the ban on federal spending on abortion permanent – something which is approved on an annual basis through the Hyde Amendment. The White House threatened to veto this bill.

Speaking in Texas on January 23, Rep. Paul Ryan said Republicans are discussing eliminating the ACA’s “insurance company bailouts” in negotiations to lift the nation's debt ceiling in February. Republicans have already introduced legislation to target the reinsurance fund and risk corridors to which Rep. Ryan alluded, which are designed to limit the risk insurers have to take and try to prevent premium spikes for consumers that result from ACA’s requirements that insurance companies accept all beneficiaries. Sen. Mike Lee also noted the “bailouts” in his official Tea Party response to the State of the Union address.

The Medicare Payment Advisory Commission (MedPAC), the independent body that advises Congress on issues affecting the Medicare program, is next scheduled to meet in March. We will provide further information on the agenda as it becomes available.

The Medicaid and CHIP Payment and Access Commission (MACPAC), the non-partisan federal agency charged with providing policy and data analysis to the Congress on Medicaid and CHIP, is next scheduled to meet on February 20 and 21. We will provide further information on the agenda as it becomes available.

Focused on initiatives like the faulty rollout of, Reps. Anna Eshoo (D-Calif.) and Gerry Connolly (D-Va.) are co-sponsoring a measure that calls for creating a U.S. Digital Government office, responsible for reviewing and guiding major IT projects of all federal agencies. The legislation would also make the role of U.S. chief technology officer a permanent position.


The federal government is seeking a candidate to fill a new position as a CMS risk management officer. The position was inspired by the faulty rollout of

According to an IRS notice released on January 23, Americans with limited health coverage under Medicaid and certain military health care programs will not be subject to the individual mandate penalty in 2014. 

HHS awarded nine states with a combined $201.2 million in new federal grants to support state-run and partnership exchanges. In order of grant amount received, the states receiving grants are Washington state, New Mexico, Mississippi, Arkansas, Delaware, Nevada, New Hampshire, Rhode Island and Utah.

On January 22 at the U.S. Conference of Mayors, HHS Secretary Sebelius encouraged mayors to urge their state legislatures to expand Medicaid under the ACA. Also on January 22, an HHS release said that more than 6.3 million people were determined eligible for either Medicaid or the Children’s Health Insurance Program (CHIP) between October and December.

The Federal Trade Commission (FTC) sued Kobeni Inc. due to spam emails it sent threatening federal prosecution unless the reader immediately clicked on a link to enroll in health insurance. The FTC accuses Kobeni and its president Yair Shalev of injuring consumers and deceptive representations, as well as violations of the FTC Act and the CAN-SPAM Act, failing to provide notice of opt out and failing to include a valid physical address in the spam mail.


On January 28, President Obama delivered his fifth State of the Union address. While health care and the ACA did not play as central a role in the speech as they have in years past, the president did note the strides that had been taken for those with pre-exiting conditions, those who are 26 and still able to remain on their parents’ health insurance plans, and that over nine million Americans had signed up for private health insurance or Medicaid coverage.

On January 23, Chris Jennings, a senior White House healthcare adviser, announced he would be stepping down from his post. An unnamed source told the Washington Post that Jennings' departure was due to health and family reasons.


On January 23, Utah Governor Gary Herbert expressed in a news conference that he backed his state’s expansion of Medicaid. Assuming the legislature is on board with Gov. Herbert, Utah would become the 26th state to agree to expand Medicaid, and a majority of states will be in this group.


On January 23, Moody’s downgraded the credit outlook for health insurance companies from “stable” to “negative.”  Some of the concerns prompting Moody’s downgrade were a rocky rollout of the exchanges, lower than expected enrollment numbers, uncertainty over who is enrolling, ever-changing regulations, troublesome back-end exchange issues and an underlying question of whether insurers are going to get paid sufficient premiums through the exchanges.

New research from the American Action Forum shows that young adults, defined as between 18 and 35 years old, may find it financially advantageous to pay the individual mandate penalty instead of purchasing insurance coverage, as long as they remain healthy.

A study from the Brookings Institution from January 27 says that the ACA will improve the “well-being and incomes of Americans in the bottom fifth of the income distribution.”  Brookings projects in its report that incomes in the bottom fifth of the distribution will increase close to 6 percent, and those in the bottom 10th of the distribution will increase over 7 percent.

Target is now planning to stop providing health insurance coverage for its part-time employees beginning in April, at which point these employees can join the ACA’s health insurance exchanges. Target's announcement follows those of Trader Joes and Home Depot among others. Target’s shift reflects the ACA requirement that employers provide health insurance to their full-time employees.


The U.S. Court of Appeals for the D.C. Circuit granted an expedited appeal of Judge Paul Friedman's January 15 ruling. On January 15, Judge Friedman upheld the IRS rule to extend tax credits and cost-sharing subsidies for the purchase of qualifying health insurance plans in health insurance exchanges established by the federal government.

On January 24, the Supreme Court granted the Little Sisters of the Poor, a group of Catholic nuns, a temporary exemption from the birth control mandate of the ACA until the 10th U.S. Circuit Court of Appeals decides the case.

To view our compilation of recent health care reform implementation news, click here.

Joint Senate Committee Hearing on Cybersecurity: 3-Point Bulletin

Yesterday, the Senate Committee on Commerce, Science, and Technology and the Senate Committee on Homeland Security and Government Affairs held a hearing titled, “The Cybersecurity Partnership Between the Private Sector and Our Government: Protection Our National And Economic Security,” in which the recent Executive Order on voluntary cybersecurity standards was discussed extensively.

  • The Executive Order directs agencies to look into incentives that can be used under existing law to encourage businesses to opt into the voluntary cybersecurity standards. Secretary of Homeland Security Janet Napolitano revealed that amongst the incentives that DHS is considering are a federal procurement preference and granting some sort of governmental seal of approval. Napolitano contends that the market in and of itself has not provided sufficient incentive for all businesses to raise their cybersecurity standards.
  • Senator Jay Rockefeller (D-WV), Chairman of the Commerce Committee, and Secretary Napolitano agreed that H.R. 624, the Cyber Intelligence Sharing Protection Act (CISPA), is “wholly insufficient.” Rockefeller particularly stressed that cybersecurity is not an issue that Congress can afford to revisit every year in a piecemeal fashion, and a more comprehensive bill must be pursued. Napolitano agreed, citing perceived insufficiencies in CISPA, such as the lack of privacy concerns and authorizing the NSA to establish standards and share information instead of a civilian agency.
  • Senator Mark Warner (D-VA) voiced concern about unintended consequences that could arise from voluntary standards. Particularly, he was concerned that the standards could create a free rider problem, stagnant standards, or entrenched standards. Complying with stagnant standards, he worried, would be both dangerous and potentially wasteful. He was also concerned that entrenched standards could create a costly, complex barrier to entry for new businesses in certain industries.


Cybersecurity 3-Point Bulletin

What’s currently being done?

The Cybersecurity Act of 2012, that was defeated in the Senate in August, provides strengthened protection against cyber attacks in the federal government and in private, critical infrastructure systems. The bill would allow the government and private enterprises the ability to share information about threats more easily. In the absence of legislation, the Obama administration has indicated that it is prepared to move forward with an Executive Order that addresses key issues.

Is the legislation dead?

Not exactly. While the Cybersecurity Act of 2012, which is a bipartisan bill supported by a majority of Senators, did not survive a procedural vote in August, Senate Majority Leader Harry Reid (D-NV) has stated that the bill will be revisited after the November elections. Secretary of Defense Leon Panetta and General David Alexander, head of U.S. Cyber Command have both urged congressional action on cybersecurity after the election.

What’s the difference between the potential Executive Order and legislation?

The Executive Order would set policy under current law in regards to cybersecurity standards on critical infrastructure. The Executive Order cannot provide liability protection. A cybersecurity bill that passed the House in April and the Senate Cybersecurity Act both provided liability protection for private entities that shared information regarding cyber threats with the Administration. Without the incentive of liability protection, an Executive Order cannot be as effective as legislation.


Infrastructure Alert - August 9, 2012


After failing to pass the Cybersecurity Act of 2012, Congress began its August recess on Friday with members of the House and Senate out of town until the second week of September. At the state level, Georgia voters shot down a one cent state sales tax that would have helped fund infrastructure improvements across the state.

On the Hill

On August 2, the Cybersecurity Act of 2012 failed to survive a cloture vote. The bill would have imposed stricter networking standards on American utilities to prevent fraudulent access or cyber-terrorism. Although the stricter measures on critical infrastructure such as railroads, water treatment facilities, and power plants were loosened from mandatory to voluntary, the bill’s critics cited privacy concerns and new costs to businesses in their opposition. President Obama had penned a rare op-ed stressing the necessity of the bill.

On July 25, Congress passed the Sequestration Transparency Act, which would require the Obama Administration to detail specifically the $1.2 trillion in budget cuts that are scheduled to take place on January 2, 2013. If President Obama signs the bill, the Office of Management and Budget (OMB) would have 30 days to report its future sequester cuts to Congress. While most federal programs will experience mandatory cuts, the Highway Trust Fund may be exempt depending on the OMB’s interpretation of the Budget Control Act of 2011.

Sen. Jim DeMint (R-SC) has blocked the nomination of Michael Huerta to Administrator of the Federal Aviation Administration, and indicated that he may object to approval of any nominations until next year. Huerta has been Acting Administrator of the FAA since last year. Sen. DeMint cited his desire to hold the vote after the election, as the nomination is to a five-year term.

In the seven months leading up to the August recess, Congress has considered a number of bills that impact infrastructure development, but only passed the Moving Ahead for Progress in the 21st Century Act, which reauthorizes surface transportation programs, leaving several infrastructure-related legislative priorities unresolved. While the House has passed H.R. 5972, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, and H.R. 5325, the Energy and Water Development and Related Agencies Appropriations Act, the Senate has yet to vote on the equivalents. Additionally, neither body has acted on bills to reauthorize Coast Guard activities (H.R. 5887/S. 1665). Further, other infrastructure bills remain stalled, such as  H.R. 6026, the DREDGE Act, which would allow the Army Corps of Engineers to dredge the Mississippi River to accommodate larger vessels traveling from the expanded Panama Canal. It is very unlikely that Congress will complete work on any major infrastructure legislation with the limited time remaining in the legislative year. Action on appropriations is expected to come in a six month continuing resolution, setting overall spending levels at those authorized by the Budget Control Act. As such, additional funding and major authorization questions will remain until the new Congress convenes next year.

At the Agencies

The Transportation Security Administration (TSA) and the American Federation of Government Employees (AFGE) have reached a labor agreement for the representation of TSA’s 43,000 employees. The labor contract, which includes collective bargaining, will require a vote from TSA employees to go into effect. AFGE was elected by TSA employees in June and has been negotiating the terms of the labor agreement since. The terms of the agreement have not been released.

The National Petroleum Council (NPC), the federal advisory committee to the Secretary of Energy, released itsAdvancing Technology for America’s Transportation Future report. The report predicts that internal combustion fueled engines will still reign as the leading vehicular propulsion system in 2030. The NPC believes that vehicles powered by compressed natural gas, not electric batteries, will be the closest competitor to combustion engines, assuming the price of natural gas remains low. However, the report states that the lack of infrastructure supporting compressed natural gas engines would be a considerable barrier to their success.

In the States

New York: Governor Andrew Cuomo is considering a plan that will reallocate $47 million in funds intended for work on roads and bridges within Seneca Nation of Indians (SNI) territory if a resolution is not reached quickly to allow important transportation work to proceed. The project to reconstruct 11.5 miles of Interstate 86 stalled when SNI leaders demanded “exorbitant” new fees for work within the territory and failed to negotiate with New York state.  In an effort to solve this dispute, New York has proposed allowing the SNI to take its fee from the more than $400 million in revenue the Senecas still owe the state relating to its three Western New York casinos. The work scheduled for SNI territory has a combined cost of over $40 million and would create hundreds of construction jobs. 

Georgia:The proposed transportation sales tax that we discussed in our last alert was voted down in nine of twelve multi-county regions. The Transportation Special Purpose Local Option Sales Tax (T-SPLOST) was a one cent state sales tax that would have helped fund infrastructure improvements throughout Georgia. If passed, the tax would have provided $18 billion for road and transit projects in the state, including $6.1 billion going to the metro Atlanta area. Although advocates of the plan had hoped that the largely Democratic Atlanta region would provide a base of support for the tax, over 63 percent of voters voted against the referendum. 

Massachusetts: The Massachusetts Senate has passed a nearly $1.4 billion transportation bond bill to fund infrastructure projects throughout the state. The bill is aimed at maintaining and repairing the Commonwealth’s existing infrastructure and creating jobs throughout the state. 

Virginia: Gov. Bob McDonnell announced that Virginia has entered into a public-private partnership to construct 29 miles of HOV/HOT lanes on I-95. The construction will create 8,000 jobs and approximately $2 billion in economic activity. Two private companies have agreed to finance $854 million of the project’s estimated $925 million price tag in exchange for a 76 year concession period on the stretch of road. Virginia will maintain ownership of the infrastructure.  The construction will begin next month and is slated to be completed in 2014. 


Cyber Security Alter

Lest one question the severity of the evolving challenges in our rapidly growing cyber world, President Obama has crystallized it succinctly: (1) "cyber threat is one of the most serious economic and national security challenges we face as a nation;" and (2) "America’s economic prosperity in the 21st century will depend on cybersecurity." In other words, President Obama has declared cybersecurity to be a national security priority.

Our firm has just posted an alert.(pdf) on "The White House's 'Progress' Report on Cybersecurity: There's a Long Road Ahead." We hope you find this information beneficial and informative.